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Government proposes lower tax for working holiday makers

28 Sep 16

AUSTRALIA

IMPACT – MEDIUM

What is the change? The Australian Government has proposed a handful of reforms to the Work and Holiday (subclass 462) and Working Holiday (subclass 417) visa programmes, including taxing working holiday makers at a lower rate than was previously set in the 2015-16 budget.

What does the change mean? Under the changes, working holiday makers would pay less in taxes and a slightly lower application fee. Employers would be required to register with the Australian Tax Office (ATO), and employers with premises indifferent regions of Australia would be allowed to employ working holiday makers for a total of 12 months and a maximum of six months in each region.

Implementation time frame: The Government aims to have the changes implemented by 1 January 2017.

Who is affected: Employers and working holiday makers holding (or eligible persons seeking to apply for) one of the visas listed above.

Business impact: Other than theATO registration requirement, the business impact is minimal.

Next steps: The changes must be approved by the Federal Parliament before they can take effect.

Background: The changes stem from a commitment prior to the most recent federal election to review tax rates for working holiday makers by the end of 2016. Among the changes the Government has proposed:

Working holiday makers will pay 19 per cent, rather than 32.5 per cent as was outlined in the 2015-16 budget, on the first A$37,000 they earn. Regular marginal tax rates would apply on any money earned after the first A$37,000.

The base visa application charge for working holiday maker visas will be reduced from A$440 to A$390.

Those who employ working holiday makers will be required to complete a one-off registration with the ATOin an effort to boost accountability and prevent exploitation.

Employers with premises in different regions of Australia will be allowed to employ working holiday makers for 12 months, with working holiday makers working a maximum of six months in each region.

Australian Treasurer Scott Morrison said in a statement the reforms are aimed at increasing “Australia’s attractiveness as a top destination for backpackers” while ensuring working holiday makers “fair tax on their earnings.”

BAL Analysis: The changes will generally benefit working holiday makers and may help Australia in recruiting more young people through the Work and Holiday and Working Holiday visa programmes. Affected employers would have to complete a one-off registration requirement with the ATO and may also benefit from changes to the mandatory work conditions imposed on Work and Holiday (subclass 462) and Working Holiday (subclass 417) visas.

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